EYE on RETAIL: Franchise Group enters Chapter 11 | HBS Dealer

Franchise Group Inc. — which owns brands like Pet Supplies Plus, The Vitamin Shoppe, and Buddy's Home Furnishings — has filed for Chapter 11 bankruptcy. According to a press release, the company has entered into a restructuring support agreement with holders of approximately 80 percent of its first lien debt. As part of the deal, Franchise Group says American Freight, a furniture and appliance retailer, will "wind down operations" at its 328 stores throughout the U.S.

According to Franchise Group, American Freight has struggled due to sustained inflation and macroeconomic challenges facing the large durable goods sector.

To implement the agreed-upon restructuring, Franchise Group, its operating businesses and the company's other affiliates commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware. Franchised locations of FRG's brands are not part of the proceedings.

As part of the restructuring plan, the first lien lender group has committed $250 million in debtor-in-possession financing which, subject to court approval and together with cash on hand, will provide Franchise Group with enough liquidity to maintain operations across its businesses.

"Today's announcement to de-lever our balance sheet is a pivotal step forward in enabling our businesses Pet Supplies Plus, The Vitamin Shoppe, and Buddy's Home Furnishings to realize their full potential," said Andrew Laurence, Franchise Group's CEO. "Each of these businesses has a demonstrated value proposition and provides great products and services to customers, which they will continue to do seamlessly during this process."

The company is filing with the court a series of customary motions to maintain business-as-usual operations on all fronts for Pet Supplies Plus, The Vitamin Shoppe, and Buddy's Home Furnishings during the process. These "first day" motions include requests to continue to pay wages and provide benefits to employees in the ordinary course and offer relied-upon customer programs. Vendors of the go-forward operating businesses will be paid for authorized goods received and services rendered after the filing.

Court filings and other information regarding the Chapter 11 proceedings can be found at this link. Vendors with questions can call (844) 285-4564 (toll-free) and +1 (646) 937-7751 (international) or email [email protected].

Willkie Farr & Gallagher LLP and Young Conaway Stargatt & Taylor, LLP are serving as legal counsel, AlixPartners is serving as financial advisor and chief restructuring officer, and Ducera Partners is serving as investment banker to the Company. Paul Hastings LLP is serving as legal counsel and Lazard is serving as investment banker to the first lien ad hoc group.